"This litigation was inevitable," said Treasurer Kennedy. "The Division of Administration drained a $500 million trust fund at OGB in order to balance the budget. Then the division changed health plans for our state workers and retirees without notice or transparency. These issues need to be litigated."
The lawsuit raises a number of issues. First, it claims the Division of Administration failed to follow the Louisiana Administrative Procedure Act in making changes to health care benefits and costs. Second, it contends the Division violated due process clauses that protect property and contractual rights and interests in health care benefits. Third, it raises contract clause violations. Fourth, it claims the Division violated its fiduciary duty to prudently administer insurance and health benefit plans.
The Office of Group Benefits provides health insurance to thousands of state workers, retirees and dependents. The state shares in the cost of health insurance with plan members. In order to lower costs, the state dropped premium rates and burned through the OGB's reserves to fill budget holes.
House Bill 370 by state Reps. Chris Broadwater, John Bel Edwards and Rob Shadoin would protect plan members in the future by creating the Group Benefits Actuarial Committee to approve premium rate recommendations. The legislation is up for consideration this session.
"The lawsuit illustrates why changes - such as those in House Bill 370 - are needed," said Treasurer Kennedy. "The authority to make decisions on health plan changes needs to be taken away from the Division of Administration."